I'm going to Mexico to teach English and was looking to go somewhere other than DF or Monterrey. I'm interested in going to Xalapa, Morelia or Uruapan, and to a lesser extent, Guadalajara. Is there anyone who has taught in one of those cities that can pass along advice on good places to work, live, hang out? Or does anyone know of some other medium sized city (population 200,000 to 2 million) that is a good place to teach and isn't overly touristy?
Also, can anyone recommend a homestay or another long term accommodation option in the above cities?

I recommend you consider Queretaro or Puebla. The latter has a huge VW plant and the city is very nice. Berlitz in Queretaro is probably the best bet. In my opinion, these would be the 2 best options. The other cities you mention can be nice places but I would question if you can survive on the pay. Even Queretaro if iffy unless you land the right gig.

I am currently in Uruapan and I have spent time in Queretaro and Morelia. These are all very fine cities and I have had no problem living comfortably on the wages. It is all relative to the type of lifestyle you want to lead. Queretaro is more of a night-life type of place than Uruapan which lends itself more to the outdoors. Morelia is right in the middle.

"inmexico," when you say "more to the outdoors," what exactly to you mean?

I have spent time in Guadalajara and some time in the Yucatan, but I'm not clear on what kinds of outdoor activities are popular once you get away from the beaches.

Also, how many native English speakers do you encounter in those smaller cities like Uruapan? Guadalajara seems to have quite a few, but I speak Spanish well enough to get by when I have to. What would be most important to me is not being the only North American around all the time. Call me unadventurous, but my Spanish isn't all that good and so my conversations are much more satisying in English than in Spanish.

Also, if you can provide me with your general impressions of Uruapan and those smaller cities close to Guadalajara, I would really appreciate it.

Uruapan is home to Parque Nacional Eduardo Ruiz. It is a great place for leisurely walks, more serious hikes, and mountain biking. Also, other outdoor activities (other than soccer) seem to very popular here. There is a baseball league, many people play volleyball and basketball. They have a few outdoor sports facilities that are all very accessable. As far as other native English speakers go, there are a few of us here. Unlike in other places the foreigner in Uruapan is very much integrated into the mainstream society.....no ex-pat bars etc. There is a fair amount of tourism, so most people do just assume you are a tourist. There are also many locals that speak near fluent/fluent English so finding a conversation to suit your needs is not usually a problem.
I hope this helps.